The government wants to make it easier for employees to change jobs by modernising the non-compete clause. According to the government, current legislation restricts employees’ mobility too much. Minister Vijlbrief of Social Affairs and Employment states that modernising the non-compete clause contributes to “fairer work”. According to the Minister, many employees do not dare to take the next step in their career, while employers are in urgent need of new staff. The bill has been sent to the Council of State for advice. The aim is to submit the proposal to the House of Representatives by the end of 2026.
What does the non-compete clause entail?
Many employment contracts contain a non-compete clause. Such a clause prohibits an employee, after termination of their employment contract, from carrying out similar work for another employer or as a self-employed professional. The non-compete clause is intended to protect employers’ business interests, such as knowledge of pricing, customer data, files, and goodwill. In practice, however, employers often use the clause to retain staff in a tight labour market. To counter this improper use, the government wants the clause to be invocable only when it genuinely serves to protect business interests, rather than as a means of pressure.
Clearer limits on the non-compete clause
The government wants to limit the duration of the non-compete clause to a maximum of one year. If the employer does not specify a duration, or specifies a longer period, the clause will be invalid. In addition, the clause must have a clearly defined geographic scope; if this is lacking, the clause will likewise be invalid. Furthermore, once the new legislation takes effect, employers will also have to justify why the clause is necessary for contracts of indefinite duration. Currently, this obligation applies only to fixed-term contracts. If the justification is missing, the clause will be invalid. If an employee considers the justification insufficient, they can ask the court to declare the clause invalid.
Compensation for enforcing the clause
Employers who, after the law takes effect, wish to invoke the non-compete clause must notify the employee of this in writing no later than one month before the end of the employment relationship. In the case of termination by the employer, this should be done no later than the termination date. In other situations, such as summary dismissal or resignation by the employee, the employer would need to invoke the clause within two weeks of that dismissal or resignation.
In addition, the bill provides that for every month in which employers invoke the non-compete clause, they would have to pay the employee compensation equal to 50 percent of their last monthly salary. This compensation would have to be paid before the end of the employment relationship. In the case of a valid summary dismissal, no compensation would in principle be owed, unless a court were to rule that the dismissal was not seriously culpable. Parties may also agree different arrangements regarding compensation in a settlement agreement, according to the proposal.
Transitional law
The bill also proposes transitional arrangements, under which existing non-compete clauses with a duration of more than one year would automatically be reduced to a duration of one year. The rules on timely invocation and compensation would also apply to existing clauses. If the term of the clause has already expired before the law takes effect, the old rules would continue to apply and no compensation would be owed.
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